On June 3, 2016, the U.S. Treasury Department’s Financial Crimes Enforcement Network (“FinCEN”) issued a notice of proposed rulemaking proposing the imposition of additional restrictions on North Korean banks and other financial institutions. The notice follows the June 2, 2016 publication of a FinCEN finding that North Korea is a jurisdiction of primary money laundering concern under Section 311 of the USA PATRIOT Act, 31 U.S.C. 5318A.
As detailed in a prior blog post, the United States recently imposed comprehensive sanctions against North Korea. While U.S. financial institutions are already generally prohibited from engaging in both direct and indirect transactions with North Korean financial institutions, the additional proposed restrictions are intended to further isolate North Korea from the international financial system.
The proposed restrictions would prohibit “covered financial institutions” from:
- Opening or maintaining a correspondent account in the United States for or on behalf of a North Korean banking institution; and
- Processing a transaction involving a North Korean financial institution through the United States correspondent account of a foreign banking institution.“Covered financial institutions” are generally defined to include the following: insured banks, commercial banks, agencies or branches of a foreign bank in the United States, federally insured credit unions, savings associations, certain banking corporations authorized to do foreign banking business, trust banks or trust companies, brokers or dealers in securities, futures commission merchants or an introducing broker-commodities, and mutual funds.
- FinCEN is seeking public comments on all aspects of the notice of proposed rulemaking. Written comments on the notice of proposed rulemaking must be submitted on or before August 2, 2016.
- In addition, covered financial institutions would be required to apply special due diligence to their foreign correspondent accounts that is reasonably designed to guard against their use to process transactions involving North Korean financial institutions.